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Despite rising wages, 61% of Americans are still living paycheck to paycheck
- mogadsheu 5y agoThe cost of housing combined with manufacturing outsourcing has basically crippled the American working/middle class since the early 2000s. Then add inflation. When Ivy League business school grads are having to save until their 40s to buy homes, what does that imply for the rest of the country?
- zamfi 5y ago> cost of housing combined with manufacturing outsourcing I think these are two separate issues. > business school grads saving into their 40s to buy homes For example, on this -- surely, if anything, manufacturing outsourcing has only made business school grads get paid more? If you're not already familiar, take a look at Baumol's cost disease [0] for more on the phenomena at play here. [0]: https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
- curiousllama 5y ago> business school grads saving into their 40s to buy homes Median pay out of top b schools is ~$125-$150k. If you have a stay at home partner and a few kids, you prob need to make partner/Director before you can buy a townhouse in a Brooklyn. That said, if you're single and work for an I Bank in Chicago, you'll be able to buy when you hit VP in your early 30s.
- zamfi 5y ago> buy a townhouse in a Brooklyn This is not equivalent to “buy homes” — this is like saying they wait until 40 to buy a car because the Honda Civic they drove in their 20s doesn’t count, they need a BMW.
- mcs5280 5y agoThe system is working exactly as designed. The politicians are enriching their wealthy donors.
- giantg2 5y ago"Ivy League business school grads" Is it possible they have to wait due to larger than average student loans (although many do come from wealth), or that the high paying jobs they seek are in HCOL areas?
- mogadsheu 5y agoI think you’re accurate about both.
- e4e78a06 5y agoPeople feel like they _have_ to live in NYC/SF/LA when they make peanuts. If those people moved to the Midwest they'd have much lower CoL and probably still around the same pay. Amazon pays $15/h wherever you are.
- pinephoneguy 5y ago
- ketzo 5y ago
- pinephoneguy 5y ago
- nightski 5y agoYeah exactly. Cost of living is so much lower and one can actually live in some very nice smaller cities with plenty of restaurants, entertainment, and nature. Good quality of life. If you are even luckier and can be a developer in those cities making 150k-200k you feel like royalty with a ton of extra money to travel often.
- asdff 5y agoThe only problem is in some of these places its hard to be a developer and cross 80k much less 150k. There is a reason why midwestern grads get poached to the coasts.
- asdff 5y agoIt's expensive to uproot which is why the working poor are often trapped in high cost of living areas. OTOH the midwest has had a huge problem for years of 'brain drain,' and that's because there are just fewer highly compensated jobs than what you'd expect in the midwest, and among these salaries are appreciably lower. People don't receive degrees at midwestern schools then move to NYC, SF, LA, wherever else without a job offer lined up, and if they take that offer its because its better than what midwestern companies who are even more active in recruiting of midwestern grads were offering them.
- kitkat_new 5y agoguess who will suffer most from global warming
- ed25519FUUU 5y agoThe rich people who are still buying ocean-front property?
- giantg2 5y agoI had a business professor joke that his house that was off the beach would be worth a fortune for his grand kids because it would end up being waterfront.
- throwaway0a5e 5y agoYes, but only because they have a ton of overlap with the much broader group of "people who will get shot in the hole they just dug for shortsightedly causing exactly the kind of societal instability that resulted in them getting shot in the hole they just dug." Humans can survive and thrive in very extreme climates. We can grow enough food for everybody. What we can't do is figure out ways for both of those things to happen without preventing people's standard of living from going so far backwards they get shooty.
- asdff 5y agoIf that stuff is ever truly condemned a level of government will pay them fair market rate (1), and there will be finagling to ensure that rate is appropriate. You forget that this is a country that has seen the mississippi flood its banks for three centuries, and rather than not develop these flood prone areas we opt to develop them, allow them to be destroyed, and offer federally subsidized flood insurance to rebuild them to be inevitably destroyed again in the future. 1. https://en.wikipedia.org/wiki/The_Sunken_City https://en.wikipedia.org/wiki/The_Sunken_City
- oh_sigh 5y agoAlmost assuredly extremely poor non-Americans who contribute very little to greenhouse gas emissions.
- newaccount2021 5y ago
- barbazoo 5y ago> Even among those earning six figures, 42% said they were living paycheck to paycheck, the survey of more than 3,000 adults found. I know there are areas with extremely HCOL, inflation, housing crisis... However, sometimes I do wonder though what some people's budgets are like that they are literally unable to save any money (paycheck to paycheck) making >$100k. Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?
- s1artibartfast 5y agoTaxes are also a big factor. Depending on your location, you could see 35-40% of that 100k disappear in taxes, and anther 40% for hosing in high cost of living areas and you are looking at 20k per year residual location.
- amrocha 5y agoNowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. I'm also very suspicious that it would cost 40K per year to rent a reasonable place for 1 or 2 people anywhere in the US except maybe SF
- s1artibartfast 5y agoI pay 35% actual rate between California and Federal taxes. IF I were self employed OSADI tax would add another 6.2%. ...... EXAMPLE: 120k income breakdown: Federal actual rate 16.5% (24% marginal) CA State actual rate 6.4% (9.3% marginal) Medicare rate 2.9% OSDI rate 12.4 % CA SDI rate 1.0% = 39% right there
- amrocha 5y agoOh wow, I didn't know freelancers have a higher tax burden, thanks for the heads up!
- s1artibartfast 5y ago>Nowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. PS the highest marginal tax rate in the US is 50.3%. Federal rate of 37% and California rate of 13.3%.
- ozzythecat 5y agoThese kinds of articles tell maybe half the story. In my early 20s, I was earning $120K a year while living in rural Texas. I had an expensive apartment (3 bedroom), a leased Lexus IS, and spent lavishly. I also got a second car (a Honda Fit) for grocery store runs. If this sounds absurd, yeah I know. 2 years of this and I had some 401K savings but no after tax investments. I wasn’t even maxing out the company match. Just before each pay day, I might have had $800 in my checking account on a good day. My case might be extreme (I don’t know), but it was certainly poor financial decisions.
- ed25519FUUU 5y agoThis is a hard story to hear because even a little bit of investment over the past 10 years of quantitative easing means you'd have some pretty big returns. Real-estate, stock market, bonds, literally anything you could throw a dart at is up big over the last 10 years.
- sparksparkapach 5y agoYes, definitely an extreme. 120k in rural texas and you can live quite lavishly. That's 4x the median income in texas, probably even more that that for the area you are in if you described it as rural. You'd have to spend quite a bit on stuff to be living paycheck to paycheck on that salary in texas. the median income in texas was 30k in 2019, probably even lower during the time you are talking about. The people making 100k and living paycheck to paycheck are in high cost of living areas, and can probably only get that salary because they are in that area
- gaspard234 5y agoTexas is very diverse. I was born in El Paso in west Texas where my high school peers making $70k can still buy a house and support a stay at home parent. Median home price is $182k and meals and labor are so much cheaper. Most of my college peers moved to Austin or Dallas where cost of living and housing is extremely different. Austin median home price is now $575k in the city and $480k for the 5 county metro region. Growing up in a working class family (dad worked at a kitchen, mom as a part time hair dresser) we always had a maid from mexico come in once a week for $60 for ~8hours. She cleans, does laundry, and even cooks a meal and makes a big pot of beans during her time. In Austin I pay $150 for a 2hr cleaning session with no extras.
- giantg2 5y ago"Americans now say they need to be making roughly $122,000 a year to feel financially secure, more than double the national average," I don't make that much, and I support a family. The only thing rest makes me feel financially insecure is the way that IT hiring "works" today. I'm slow at code screen and my background is in irrelevant systems. Living in a terrible area for IT jobs doesn't make it any easier. If I could easily switch jobs and retain a similar salary, then I would feel good.
- cercatrova 5y agoHave you seen this list of companies that hire without whiteboard/coding interviews? You might also want to refresh your skillset into something like React and NodeJS which has a lot of jobs these days. After having done so, it is relatively easy to get jobs making into the six figures. Hope this helps. https://github.com/poteto/hiring-without-whiteboards https://github.com/poteto/hiring-without-whiteboards
- giantg2 5y agoThanks
- ed25519FUUU 5y agoThe fed is in an impossible situation. Raise rates to fight inflation and the stock market tanks and we enter into a recession, unemployment. Or ignore inflation and the middle class is slowly boiled in raising gasoline, housing, and other prices. Either way the middle class and poor get screwed but the wealthy who took out ultra low interest fixed rate loans to buy up assets all over the country are going to do fine.
- fartcannon 5y agoIt's an easy fix. The poor and the middle class need a bailout. They're too big to fail.
- JaimeThompson 5y agoThe problem for a lot of the poor and middle class is their elected officials will not talk to them since they don't donate to them. Take Texas for example it is rare for the Texas Senators to actually talk to normal people anymore.
- JoeAltmaier 5y agoIt's a hard problem. Texas has 27 million residents. And 2 Senators. If they spent an hour a day talking to constituents and spent 15 minutes with each one, it would take 16,875 years to talk to each one, once.
- MomoXenosaga 5y agoThe only people senators want to talk to is their donors. Money is speech.
- JoeAltmaier 5y agoThere was even a SchoolHouse Rock episode about that - how lobbyists represent money, and money represents people, so it's all nice and democratic!
- jeffbee 5y agoNot very detailed article. The main problems for everyone are housing and transportation, which share a solution. One quick hint for the president and his party: a "gas tax holiday" is not that solution.
- onion2k 5y agoIf wages are rising less than living costs then wages are falling.
- legitster 5y agoWe make 6 figures and live paycheck to paycheck... but only because I am socking away so much money into stock purchases, 401k, HSA, etc. This isn't a very good metric for determining financial health.
- dragonwriter 5y agoIf you have a significant rate of positive saving/investment from income surplus to current consumption, you are not living “paycheck to paycheck”.
- legitster 5y agoI'm not sure if that's how I would have responded to this survey based on the wording of the question.
- dragonwriter 5y agoI think the term is widely enough understood that most people would understand it, but I also will agree that reliably measuring facts other than the fact of the popularity of opinion by a one-question survey that does nothing to confirm a common understanding of the question is very much unreliable.
- anm89 5y agoIf it's going into restricted accounts like 401ks and HSAs you could be putting away a lot and still very literally be pay check to paycheck for your monthly expenses.
- asdff 5y agoThat's not living paycheck to paycheck, that's called a balanced budget.
- zamfi 5y agoThis measure strikes me as less informative than a measure of how much of Americans' spending is discretionary (i.e., not on "essentials" like rent, food, utilities, internet, transportation, clothing, etc.). One tricky piece, of course, is that "food", "transportation", "clothing" can include both discretionary and non-discretionary spending. (As in, you need to eat, but you don't need to get takeout every day.) Given that unemployment rates are at historical lows, support for short-term unemployment is relatively generous, and social security exists -- perhaps we should be unsurprised that most people are living "paycheck to paycheck".
- yladiz 5y agoPaycheck to paycheck generally means that there is little money left for “discretionary” spending, and even assuming there is a large percentage of people who spend when they shouldn’t, 61% is staggering and can’t be explained by that reductive argument alone. Assuming it is correct, to be that high indicates more systemic issues in the system.
- zamfi 5y agoMy point is that people's non-discretionary spending can grow to meet income, rendering "paycheck to paycheck" kind of meaningless. The family of 4 making $150k and spending not-cheapest-option $40k on childcare and not-cheapest-option $40k on groceries from Whole Foods (or wherever), while paying $30k annually in not-cheapest-option rent, may also believe they have no discretionary income. But that doesn't mean the same thing.
- yladiz 5y agoSure, but most families don’t make that much money so it’s kind of a false dilemma and so I disagree that “paycheck to paycheck” is rendered meaningless because in many cases discretionary spending simply can’t just increase because there is little left after the nondiscretionary money is spent.
- zamfi 5y ago
- c7DJTLrn 5y ago(perhaps) unpopular observation: as tough as the economy is, most people are just bad with money. I know so many people who would rather spend money on impulse than save it. It's not even necessarily their fault - why save if house prices are still increasing faster than you can catch up with? Is it any wonder young people generally just want to splash out on whatever keeps them happy?
- soared 5y agoI agree that financial literacy is a solution to many financial woes, but it is not up to an individual to seek it out. Low income people often don’t know it’s possible to escape their poverty, much less how to do it.
- milkytron 5y ago> Low income people often don’t know it’s possible to escape their poverty, much less how to do it. Idk, I think that's a pretty broad generalization. Many certainly know they can escape poverty, but the how is important. When I was working three part time jobs just to keep my head above water and have some amount savings, I would think to myself that this is just temporary. Eventually things will get better. I often wonder how many people fall into this "My money situation is just this way temporarily, I'll make more later at some point and things will be better" The dangerous part is not acting to change that temporary situation. It's exhausting to do the routine of work day by day. Then taking the extra effort to get an education, find a better job, etc all become more difficult when working multiple jobs just to stay afloat.
- jjtheblunt 5y agoisn't it the case that inflation exceeding wage growth is effectively shrinking wages?
- LiquidPolymer 5y agoI’m a relative newcomer to a comfortable, middle class life in the U.S. One of my biggest terrors is falling back into poverty. However, most of my friends and colleagues are all too happy to live beyond their means. People I know who have large, immaculately well cared for homes with gardeners and German cars in the driveway live paycheck to paycheck. One realtor I know never sets aside enough money to pay her substantial tax bill (she is on payment plans to the IRS). From the outside they appear wealthy, but they are nearly always broke. The same realtor will happily pay $2000 for a pair of jeans. I don’t get it. I make a great living. I paid off my house and drive a 2004 Outback. My retirement is looking good. This alleviates my fear of slipping into poverty. I guess I just don’t care about the window dressings of wealth that are so important for some people.
- zamfi 5y agoOr: your friends and colleagues have never lived in poverty and don't fear it as much as they fear losing the other trappings you mention.
- bittercynic 5y agoMy situation is not so different from yours, and I wonder how common we are. Maybe a pretty large fraction of Americans live a thrifty life and are quietly baffled by our peers' extravagance.
- joe_the_user 5y agoA software engineer might not need to impress anyone to advance their career. But I think some careers do require a person to first look successful in order to be successful (sales(real estate), management, law, many kinds of consulting). I don't know how much someone has to spend on appearance in those situations but maybe the people themselves don't know either and so over-spend just to be sure. Maybe the $1000 jeans would help your friend impress the truly wealthy and maybe they wouldn't. Which isn't saying that some people don't compulsively and unnecessarily spend. But in mid-level careers, determining how much is over-spending may be hard (which increases the temptation to spend, naturally).
- RickJWagner 5y ago
- bluGill 5y agoThings to spend money on raise to fit your paycheck, no matter how much you earn. I could support my family only half of my income. I'd have to get rid of this house for one where payments are a lot cheaper. I'd have to eat cheaper meals. I have to quit buying so many toys... But I have a large income, and I like my lifestyle. I do have good savings that comes out first, but sometimes I wonder why: both my parents got cancer at 65 (they are still alive, but social security is more than enough to pay for what their body will allow them to do), I had other friends who didn't even make it to retirement. Why not enjoy life and the money I make now - I can't take it with me when I'm, dead. (of course I also know those who lived to over 100)
- bingohbangoh 5y agoOne almost thinks there will always be a base of americans living paycheck-to-paycheck. If you read Road to Wiggin Pier, Orwell talked about his vain attempts to get people to save money from week to week. Instead they wasted it on strong tea and good toast. What he came to realize was that this was _all these people had to look forward to_. Even if wages were to rise, some people's first thoughts aren't to save it but to buy something that brings them joy because that extra couple of dollars' worth of joy is worth more than whatever it brings them saved in a bank account, socked in a share or two, etc.
- dbrueck 5y agoI'm hesitant to write this because of the potential responses, so let me start with this caveat: I know many people are doing their best and are still barely scraping by, and that what I'm writing below does not apply to many people, etc. Ok: For a few years I was in position to help review families' finances and offer counseling and direct them to community resources, and here are some things I learned: 0) comparison is the thief of joy 1) people are wasting huge amounts of money on credit card interest payments 2) spending less than you make is the main factor in not being constantly stressed by your finances, not having any debt is a close second 3) being stressed about your finances really sucks the fun out of life (and is super hard on most marriages) 4) getting a raise but not increasing your standard of living is often the easiest way to accomplish #2 (and fixing #1 if needed) 5) most people either overlook meaningful spending cuts they can make, or they want other things more than reducing financial stress (see #0) - these choices can be hard (e.g. move away from HCOL area) but those who are willing are almost always able to achieve #2 and are much happier as a result
- YaBomm 5y ago